Assigned to FIN AS
PASSED BY COW
Assigned to FIN AS
PASSED BY COW
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
government property; abatement; slum; blight
Purpose
Modifies existing requirements pertaining to abatement of the government property lease excise tax (GPLET) for property improvements located in the central business district of a city or town.
Background
The GPLET was established as a replacement for the tax on possessory interests that was repealed in 1995 (Laws 1996, Chapter 349). The GPLET is a local excise tax that is based on the square footage of a building rather than its value and is levied on private entities (prime lessees) that lease the property of a city, town, county or county stadium district (government lessor) for commercial or industrial purposes for at least 30 days. The GPLET rate is dependent upon the date the lease was entered into and the type of property use as follows:
|
Type of Property |
GPLET Rate for Leases Entered into Prior to June 1, 2010 |
GPLET Rate for Leases Entered into on or After June 1, 2010 Through December 31, 2011 |
GPLET Rate for Tax Year 2018 |
|
One Story Office Structure |
$1.00 per square foot |
$2.00 per square foot |
$2.18 per square foot |
|
Two to Seven Story Office Structure |
$1.25 per square foot |
$2.30 per square foot |
$2.51 per square foot |
|
Eight or More Story Office Structure |
$1.75 per square foot |
$3.10 per square foot |
$3.38 per square foot |
|
Retail Structure |
$1.50 per square foot |
$2.51 per square foot |
$2.74 per square foot |
|
Hotel or Motel Structure |
$1.50 per square foot |
$2.00 per square foot |
$2.18 per square foot |
|
Warehouse or Industrial Structure |
$0.75 per square foot |
$1.35 per square foot |
$1.47 per square foot |
|
Residential Rental Structure |
$0.50 per square foot |
$0.76 per square foot |
$0.83 per square foot |
|
All Others |
$1.00 per square foot |
$2.00 per square foot |
$2.18 per square foot |
|
Parking |
$100.00 per parking space |
$200.00 per parking space |
$217.94 per parking space |
Laws 2010, Chapter 321 increased the GPLET rates for new leases entered into on or after June 1, 2010. Additionally, the 2010 law required the Arizona Department of Revenue, beginning December 1, 2011, to: 1) annually adjust the GPLET rates for each type of property use based on inflation; and 2) to post the adjusted rates for the following calendar year on its official website and transmit the adjusted rates to each county treasurer by December 15 of each year (A.R.S. § 42-6203).
The GPLET may be abated by a city or town for a limited period beginning when the certificate of occupancy on the government property is issued and ending eight years after issuance, provided that: 1) the property is located in a single central business district of the city or town and is subject to a lease or development agreement entered into on or after April 1, 1985; and 2) the property improvement resulted or will result in an increase in property value of at least 100 percent (A.R.S. § 42-6209).
Unless abated, GPLET revenues are allocated among taxing jurisdictions as follows: 1) to counties, 13 percent; 2) to cities and towns, 7 percent; 3) to community college districts, 7 percent; 4) to common school districts or high school districts, 36.5 percent; and 4) to unified school districts, 73 percent (A.R.S. § 42-6205).
Laws 2017, Chapter 120 restricted, beginning January 1, 2017, the lease period for a government property for which the GPLET is abated to eight years, regardless of whether the lease is transferred or conveyed to subsequent prime lessees during that period. It further exempted leases or development agreements for the lease of government property from the lease period restriction if either of the following occurred before January 1, 2017: 1) a corresponding resolution, ordinance or submitted request for proposal for the lease or intent to lease such property was approved by the governing body of the government lessor; or 2) the proposal was submitted to the government lessor in response to a request for proposals (A.R.S. §§ 42-6203 and 42-6209).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Restricts the size of a central business district for a city or town to the greatest of:
a) the existing total land area of the central business district as of January 1, 2018;
b) two and one-half percent of the total land area within the exterior boundaries of the city or town; or
c) 960 acres.
2. Specifies that geographically compact means a form or shape that has a length of not more than twice its width as measured from at least four points on the exterior boundary of the expanded areas of an existing central business district or a newly formed central business district that is formed on or after January 1, 2018. Any central business district formed before January 1, 2018, is considered geographically compact.
3. Provides for automatic termination of the designation of a slum or blighted area with a central business district that is originally designated effective October 1, 2018, after 10 years, unless formally renewed or modified by the city or town, either in whole or in part.
4. Requires a city or town to review a slum or blighted area with a central business district before the 10th anniversary of its designation and to renew, modify or terminate the designation pursuant to the review. If modification or renewal of the original slum or blighted area designation occurs, subsequent reviews must occur every 10 years. Automatic termination of the designation would occur five years after review if a city or town fails to renew or modify the designation.
5. Requires each city and town to review all slum or blighted areas with central business districts originally designated before September 30, 2018, and either renew, modify or terminate the designations pursuant to the review. If modification or renewal of the original slum or blighted area designation occurs, subsequent reviews must occur every 10 years. If a city or town fails to renew or modify the designation, then the designation automatically terminates either:
a) on October 1, 2025; or
b) 5 years after any subsequent review.
6. Exempts, from the termination requirements, government property leases or lease development agreements that meet either of the following conditions:
b) a development agreement, ordinance or resolution was approved by the governing body of the government lessor before the termination or modification of the slum or blighted area designation that authorized a lease on the occurrence of specified conditions and the lease was entered into within five years after the date that the development agreement was entered into or the ordinance or resolution was approved by the governing body.
7. Specifies that termination requirements do not affect any existing project of the following located within the designated area:
a) any educational institution operated by a 501(c)(3) nonprofit educational organization;
b) any charter school owned by a nonprofit organization;
c) any private nonsectarian school; or
d) any private nonsectarian organization established to fund a joint technical education school district.
8. Makes technical and conforming changes.
9. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Replaces references to redevelopment project area with references to slum or blighted area.
2. Modifies grandfathering provisions.
3. Makes technical and clarifying changes.
Amendments Adopted by Committee of the Whole
· Makes technical and clarifying changes with respect to slum or blighted area designation and designation review.
House Action Senate Action
WM 2/14/18 DP 7-0-1-1 FIN 3/14/18 DPA 7-0-0
3rd Read 2/28/18 58-0-2
Prepared by Senate Research
March 26, 2018
FB/lat